Alberta Plan Lowers Charitable Tax Deduction Rate

April 15, 2015

Although Alberta's proposed Fiscal Plan for 2015-2020 states that the "charitable sector provides valuable goods and services to Albertans," the plan reduces the value of the charitable tax credit for total donations over $200.

On Mar. 26, 2015, Robin Campbell, President of Treasury Board and Minister of Finance in Alberta, presented the province's Fiscal Plan 2015-20 in the Legislative Assembly of Alberta.

Although AFP is pleased that the Fiscal Plan recognizes the fact that the "charitable sector provides valuable goods and services to Albertans in areas such as health care, education, poverty relief and the protection of the environment," we are concerned about the provision contained in the plan that reduces the charitable donations tax credit rate from 21 percent to 12.75 percent for total donations over $200.

The tax credit was increased from 12.75 percent to 21 percent on total donations over $200 in 2007, which would provide a tax savings of 50 cents for each dollar donated in excess of $200 (when coupled with the federal tax credit).

Some critics have argued that the credit enhancement was not as effective as anticipated, noting that donors received significant tax savings but that the increased credit had limited success in encouraging higher total donations.

However, AFP contends that the efficacy of the enhanced tax credit over the past few years likely was negatively impacted by the economic downturn that occurred shortly after the credit was introduced. In addition, research like the 2013 General Social Survey – Giving, Volunteering and Participating shows that overall fewer Canadians are now giving just slightly more to charities.

“Given the economic environment over the past several years, it would be extremely short-sighted for the government to reduce the tax credit so drastically,” said Andrea McManus, CFRE, chair of the AFP Canadian Government Relations Committee. “We’ve got to grow the number of Canadians who give—that’s crucial to a healthy nonprofit sector. Let’s give the tax credit more time to work—and the nonprofit sector more time to build its donor base in a stronger environment. Otherwise, we’re just making knee-jerk reactions that aren’t going to benefit our communities.”

McManus also noted that it often takes several years for taxpayers and tax planners to fully adapt to changes in the tax code—another reason the credit may not have had the initial impact fundraisers and the government expected originally.

AFP plans to engage the Alberta government to urge it to preserve the twenty-one percent charitable donations tax credit. We will keep members of further developments on this issue and if member engagement is needed.